Scourge of family feuds blights China

A brutal feud between Chinese ruling families has spilled into the public arena, with the son of a revered Communist Party leader accusing rivals of sending armed thugs to take over his luxury villa complex in suburban Beijing.

Hu Dehua, the 63-year-old ''princeling'' son of a popular 1980s reformist leader, told Fairfax Media his security guards fled in terror as 200 armed men invaded the site, stole all the documentation of his company, Jingda Real Estate Development, and took over compound management.

The incident took place 3½ years ago in Beijing's Shunyi district, which is favoured by expatriate families for its international schools, golf courses and expansive, gated compounds.

Raid: Beijing's Lakeside Villas development is invaded by armed thugs in 2009. Developer Hu Dehua says they took over the site and stole his company's documentation.

''At least 200 thugs, armed with sticks, guns, chains and other tools of violence'' forced their way through the gates of the Lakeside Villas at 8.30am on Sunday, August 2, 2009, according to a complaint Mr Hu has prepared to send to a member of the Politburo Standing Committee.

Mr Hu alleges the armed occupation enabled his rival's company to complete a discounted purchase of property from Mr Hu's company and on-sell at an enormous profit. He estimates the raid and other illegal dealings have cost his company more than 600 million yuan (about $90 million). He believes his adversaries were backed by senior party figures and says police chiefs have told him they had no power to intervene.

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Collusion between officials, developers and mafia-style ''black society'' thugs has become common in China, where the law is explicitly subordinate to politics and politics is shaped by money.

Foreign and local business operators say China's legal environment has deteriorated. Some lawyers and scholars have diagnosed a ''mafia-isation'' of government and business, and several Australian businessmen are in Chinese jails after what they allege were mafia-style ''shakedowns'' of successful businesses.

Speaking out: Hu Dehua alleges the armed occupation of his company's luxury villa complex was instigated by a business rival.

Last week, the new Premier, Li Keqiang, tied his task of rebalancing the Chinese economy to the creation of a credible legal system.

''Everyone has to respect the rule of law, which is essential for building a modern government, economy and society,'' Mr Li said.

But it is unprecedented for the princeling son of a prestigious leader to say he has been the victim of such a mob-style attack and to blame it on other powerful families.

(If the dispute could have an Australian parallel, it would be like James Packer, the casino mogul, being accused of sending armed thugs to appropriate a development of Nick Whitlam or Stephen Hawke, and the state police refusing to intervene.)

Mr Hu has levelled his accusations at a subsidiary of SOCAM Development, a member of the Shui On Group, which is chaired and controlled by Hong Kong billionaire Vincent Lo. Mr Lo, the son of a Hong Kong property tycoon, graduated from the University of NSW in 1969 and secured his foothold on mainland China in Shanghai in the 1980s. His interests have expanded to other cities, including Dalian and Chongqing.

Mr Lo enjoys close ties with members of the ''Shanghai faction'' that rose to power following the purge of Mr Hu's father and other reformers in the late 1980s.

He is one of 43 US-dollar billionaires on the Chinese People's Political Consultative Conference, a top-level political advisory body that helps the Communist Party keep Hong Kong under tight control.

A SOCAM spokeswoman Vanessa Shan said SOCAM ''categorically refutes'' all accusations made against the group and its executives, including Mr Lo. Ms Shan noted Mr Hu's company had not initiated legal proceedings, despite the lapse of several years, and said Mr Lo was not involved in the daily operation of SOCAM subsidiaries.

Mr Hu, a software developer and adviser to the Australian iron ore miner Fortescue Metals Group, was approached by Fairfax Media two years ago to discuss the 2009 incident.

He has agreed to speak publicly only after this month's completion of a wholesale political leadership transition, which is potentially destabilising for the personal networks and related business empires of outgoing leaders, including some members of the Shanghai faction.

Last week Jia Qinglin, who is reportedly a key patron of Mr Lo, was replaced as head of the Political Consultative Conference by one of Mr Hu's ''princeling'' childhood friends, Yu Zhengsheng. Mr Yu has also replaced Mr Jia as China's fourth-ranked leader.

Mr Hu alleges SOCAM officials ''colluded with officials and mafia gangs and adopted violent means to break into my company's compound and rob and steal my company property'', according to the cover letter of his complaint, which is addressed directly to Mr Yu.

''This is a serious matter, and it is about the respect for and dignity of the national legal system and the Political Consultative Conference honour,'' he wrote. Mr Hu's complaint says the purpose of the SOCAM subsidiary's action was to enable it to acquire his company's assets ''at a very low price''.

The background to the dispute is heavily contested, with Mr Hu's company, Jingda, alleging that SOCAM placed it under financial stress by arranging to buy 133 of 187 villas but failing to fulfil the contracts. The villas were subsequently forced to auction in 2007 and 2008, with Mr Hu alleging a rigged process in which the auctioneer and bidders were all related to SOCAM.

Ms Shan said the transactions were proper and lawful. ''SOCAM acquired the 133 villas in Beijing Fengqiao project via its subsidiary in full compliance with all the relevant laws and regulations,'' she said.

Whatever the motives behind the August 2009 raid, and whoever was behind it, in September 2010, the SOCAM subsidiary on-sold the 133 villas for $HK944.9 million ($117 million), including the value of assigned debts, according to documents filed by SOCAM to the Hong Kong stock exchange.

Several witnesses have told Fairfax Media that thugs and security personnel arrived early on the Sunday morning in August 2009 to evict security guards and workers, formed a ''human wall'' across the entrance and decked the perimeter walls with barbed wire and broken glass.

One of the witnesses, Jingda's former head of security Zhang Xinhua complained that Jingda failed to compensate him for more than 3000 yuan - nearly a month's salary - stolen from him during the raid. Several witnesses said the attackers were heavily armed.

''I noticed a few of them holding guns,'' said Wang Xueming assistant manager of Jingda. ''There was also a black bag full of guns,'' he said. ''When I started taking video they started hiding them away.''

Mr Wang said he watched one of the thugs point a gun at a Jingda colleague as he made a call to police. Police arrived immediately, about 8.20am. They detained a gang leader but then released him and withdrew on the grounds that it was an ''economic dispute'', according to Mr Hu and other Jingda executives.

Witnesses said they recognised some leaders as having associations with SOCAM.

''SOCAM's field commander Wang Haiyun, was seized [pressed down to the ground and having his belt taken away] but suddenly, after receiving a phone call from a leader, police changed their attitude immediately,'' Mr Hu said in his complaint to the Chinese leadership.

Representatives of Mr Hu's Jingda and the SOCAM subsidiary met for mediation on August 20, 2009, according to official minutes taken by the local Mapo township government and seen by Fairfax Media.

The minutes list Wang Haiyun, who witnesses said was briefly detained on August 2, as representing the interests of SOCAM at the meeting.

When phoned last week, Mr Wang said to contact his ''colleagues'' at SOCAM. ''Whatever [answer] they gave you is also mine,'' he said.The SOCAM spokeswoman declined to say whether Mr Wang had a relationship with the company. She declined to say whether SOCAM or Mr Lo had knowledge or involvement in the 2009 incident, or whether it had taken place at all.

At the August 20 meeting, township officials noted ''the dispute is complicated'' and advised SOCAM to hand back management of the compound to Jingda, according to the minutes. ''Each side is strongly prohibited from using illegal methods that bring an impact to community stability and security of society,'' officials said, according to the minutes.

While details remain contested, the dispute illustrates the scale of challenges facing the new President, Xi Jinping, who has vowed to fight corruption and implement the constitution but who must also balance the interests of powerful patrons who brought him to power.

Mr Xi was enlisted by leaders of the Shanghai faction and worked under Jia for more than a decade. He is also a close family friend of the Hu family and regularly accompanies his mother to pay their respects to Mr Hu's mother at Chinese New Year.

Mr Hu recalled a famous propaganda play called The White Haired Lady, about how the Communist Party intervened to prevent powerful families bullying the underprivileged.

''But this time it is the government that has the power to bully ordinary people,'' he said.

Mr Hu said he could write off the episode as ''bad luck'' if it had been a unique occurrence, but there were many other examples of how powerful people had used violence to seize real estate.

He singled out the case of Bo Xilai, the fallen party boss of Chongqing. Mr Hu has previously questioned why Mr Bo has been detained but those who promoted and protected him have carried on unaffected.

Mr Hu acknowledged that his special family status gave him the power to speak out in a way that ordinary citizens could not.

''I can talk to some degree,'' he said. ''But if it were not [for my background], what would have happened?''